The trade war in 2019 had investors really excited about the prospects of the industrial real estate markets in South East Asia (SEA), particularly in Vietnam, Indonesia and Malaysia. We do not think that has changed with the COVID-19 issue, but we do want to caveat that manufacturing in SEA is highly dependent on China. The complexity of China's embeddedness in the regional supply chains should not be underestimated. This virus outbreak has already exposed the weakness of many emerging SEA markets which struggle with the potential value chain disruptions. Even if the industrial sector in SEA benefits significantly from spillover effects, intermediate production goods in many instances still rely heavily on China's exports. In the near term, there will not be a total hollowing out from China, as the displacement will take years to be meaningful for many players looking at SEA's industrial sector.

It does not mean that companies will cut down on their office footprint drastically, but it is likely that there might be a stronger inclination towards shared workspaces, which frees up the long term lease commitments of many office tenants. This is not all good news for office landlords but it does suggest that adopting active leasing strategies to capitalize on the workspace of the future may bear fruit for pre-emptive office space owners.

There has already been a general reluctance and aversion towards investing into sectors and markets that rely heavily on tourism and human flow. The GFC and SARS outbreak exposed many hotel and retail investments to huge fluctuations in capital values and income, as the tourist tap seemingly turned off overnight. We can list Japan hospitality as a prime example, where for instance, even the recent allure of the tourism story in Japan could not motivate most conservative investors. Indeed, some sectors are susceptible to even the mildest of disruption in the movement of people across borders, and that could be caused by geopolitical factors, not necessarily a virus outbreak. Once again, the COVID-19 crisis has proven to detractors that tourist-dependent strategies can be fleeting and we expect that investment return requirements in the hotel and prime retail segments may be adjusted upwards.